November 11, 2003

SUBJECT: Transportation Strategic Program – Approval of Funding Strategy and  Transportation Impact Fee Adoption

REPORT IN BRIEF

The City Council approved a 1998 Study Issue to review potential revenue sources for major transportation capital improvements in the City.  Previously approved studies and the Land Use and Transportation Element of the General Plan identify a number of major roadway capital improvement projects that will be necessary to mitigate increased travel in the City generated by new development over the next 20 years.  The Transportation Strategic Program seeks to identify a comprehensive improvement and funding program to mitigate new development over the life of the General Plan.  Without adoption of a program and identification of funding for improvements, traffic congestion could negatively affect the City's development, economy, neighborhoods, and environmental health, among other things.

Staff has developed a recommendation for a comprehensive funding strategy, and is requesting conceptual approval of the strategy and approval of  implementation steps. 

BACKGROUND

During the course of development of the updated Land Use and Transportation Element (LUTE) in 1997, it became clear that a comprehensive program of major transportation capital improvements was required to support planned land use plans.  At the time of adoption of the LUTE, no financing program had been identified to fund these improvements.  The Transportation Strategic Program, as it is currently named, was initiated in 1998 to provide the financial basis for the City's current land use and transportation plan.

Key components of the Transportation Strategic Program effort were the establishment of an interim revenue mechanism to recognize the impact of new development on future forecast transportation deficiencies, completion of an updated transportation forecasting model, development of cost estimates, and public outreach.  These steps have been completed.  The interim revenue mechanism was instituted administratively beginning in January, 2000.  The transportation model received a finding of regional consistency from the Santa Clara Valley Transportation Authority in March, 2002, and staff presented future transportation forecasts and cost estimates to the Council at a August 13, 2002 Study Session.  Over the past fourteen months staff has conducted a public outreach effort to gather feedback from concerned parties.

EXISTING POLICIES

Study of potential development of new transportation revenue sources for transportation is consistent with:  

Fiscal Sub-Element

7.IB.6, “Use all available funding sources to finance capital improvement projects consistent with City priorities.”

Land Use and Transportation Element

C3.7. 1, “Develop alternatives and recommendations for funding mechanisms to finance the planned transportation system.”

DISCUSSION

Over the last decade the City has adopted a number of long range land use plans covering the next 20+ year timeframe including the Futures Study, the  Lockheed Site Master Use Permit, the Downtown Development Plan and the Fair Oaks area General Plan Amendment.  In 1997 plans were consolidated into a unified Land Use and Transportation Element (LUTE).  Plans adopted since that time have been amended into the LUTE, and have included mitigating transportation programs.  These plans and the LUTE identify transportation mitigation required to support the plans, but do not specify  funding from assured sources.  As a result, development is occurring without a solid financial plan for mitigating negative impacts on the transportation system.

The cost of this mitigation is considerable, currently estimated at $ 167 million.  This level of funding cannot be accommodated by the City's current Resource Allocation Plan.  In order to provide for planned, orderly development in Sunnyvale over the next 20 + years, new revenue sources must be identified and implemented for transportation improvements.

Revenue studies are typically very involved due to the complexity of revenue mechanisms.  Outside funding sources and the likelihood of receiving funding from those sources must be choreographed with regional agencies. Locally reliable sources such as fees and assessments require detailed study of revenue generation potential and legal issues with the scope, amount and justification of fees.  Fairly detailed cost estimates of improvements that would be eligible for fee revenue are also necessary.  Crafting a logical package of revenue sources and a proposed menu of capital improvements is another component of these studies.  At this time staff has developed a program that comprehensively addresses forecast transportation improvement funding needs, and fully funds the necessary local commitments over the life of the City’s general land use plan.

Transportation Strategic Program Components

Transportation Model Upgrade, Future Forecasting

Transportation models are computer forecasting tools that create a virtual replica of the roadway system and its operation.  Land use types, roadway characteristics mode splits, and other information are collected, programmed, and calibrated to real traffic volumes and conditions observed on the roadway system.  From this base, scenarios about future land use and transportation system improvements can be programmed to gauge the impact to transportation system capacity, and future improvement needs can be identified.

Transportation models, by virtue of their ability to link land development with traffic generation, are useful tools for revenue studies.  Models can identify trip types, trip end locations and trip routes.  At a basic level, a model can assist in determining what types of revenue mechanisms could meet legal tests of nexus and rough proportionality.  This can be useful, for example, in making decisions about a general citywide tax versus a targeted assessment district or impact fee.  At a more detailed level, models are useful for identifying specifically who should pay for what, i.e. determining assessment district boundaries and supporting the mathematical calculations necessary to develop equitable impact fees.

The City’s previous transportation model dated from 1989.  Model assumptions were not up to date, and the software did not reflect the current state of the art.  Further, the Santa Clara County Congestion Management Program (CMP) establishes certain consistency and other requirements for municipal models.  The City's 1989 model was only partially consistent and could not be used for some CMP planning requirements, like deficiency planning.

A new model has been developed by the firm of CCS Planning and Engineering, in conjunction with Dowling Associates and Hexagon Transportation Consultants.  This model uses a base year of 1998 and projects future growth to buildout of the General Plan (2020).  The model has been certified consistent by the CMP.   Staff has applied the model to a range of alternative future scenarios reflecting the Fair Oaks ITR re-zoning, the Downtown Improvement Plan, and the Moffett Park Specific Plan Project Alternative as well as alternative transportation system assumptions.

To provide a thorough evaluation of future transportation system conditions, the transportation model results were augmented with location-specific analyses of complex interchange and signal systems.  Also, the City and the County cooperatively developed future forecasts for the County Expressway system which reflect the regional nature of these facilities and jurisdictional responsibility.  These analyses provide the basis for determination of future transportation deficiencies for the Transportation Strategic Program.  Deficient locations and recommended improvements are listed in Exhibit A.

Cost Estimating

Estimating the cost of improvements is a critical phase of a revenue study, particularly for projects that are deemed necessary in the near term.  Those projects that the Strategic Program effort determines are priorities must be engineered to the point that highly reliable, legally defensible cost estimates can be determined.  Conceptual designs and planning level cost estimates have been prepared by the TSP consultant for City streets, the County of Santa Clara for the expressway system, and the City and VTA’s consultant for Mathilda/237 area improvements to document anticipated costs to provide roadway improvements to correct future forecast deficiencies.

Revenue Alternatives

Identification of revenue alternatives involves evaluating things like levels of anticipated development, location of development, trip generation/impact on congestion, equity of mechanisms for assessing fees (i.e. per square foot, number of trips), etc.  The relative impact of various revenue mechanisms given this information was assessed by staff, and presented to the public as part of an outreach process.  Staff review included a team of City Council and Planning Commission representatives, the City Attorney, key staff members, and traffic and finance consultants.  Vice Mayor Tim Risch and Planning Commissioner Chris Moylan served on a review team.  Funding recommendations were derived by staff through this process.  A range of available revenue generation mechanisms was evaluated with respect to future forecasted growth and needs in Sunnyvale, including outside government assistance, impact fees, funding districts, property taxes, and user fees.  A matrix of potential revenue alternatives considered listing characteristics of each is attached as Exhibit B.

The recommended funding strategy is based on the following components and concepts: 

·         A two-tiered transportation impact fee on new development

Ø       one tier for areas outside of the Moffett Industrial Park ($ 29 million)

Ø       a second tier for the industrial area north of Route 237 (Moffett Park Specific Plan area) that includes funding of a local share of Mathilda/237 area improvements ($ 38 million)

·         A “fair share” of funding by the City for County Expressway improvements, with the County assuming responsibility for the non-City share ($ 75 million)

·         Outside funding with appropriate City match for Mathilda/237 corridor. ($ 25 million).

Through development of technical supporting data, coordination with the County of Santa Clara and VTA, and public outreach, staff believes the proposed Program is reasonable, sound, and effective.  Table 1 summarizes the funding components of the Transportation Strategic Program.

Table 1 – Transportation Strategic Program Funding Summary (.pdf format)

Transportation Impact Fee

Staff is recommending that the City Council adopt a Transportation Impact Fee ordinance on new development in the City, effective January 1, 2004 and an amendment to the current fee ordinance (Exhibits C and D).  This fee would feature two tiers, for areas inside and outside the Moffett Industrial Park, consistent with levels of impact and benefit related to development and recommended traffic improvements.  The transportation forecasting model shows that new development over the life of the General Plan (as well as new land use plans under consideration, such as the Moffett Park Specific Plan) will cause transportation capacity deficiencies at seven intersections at various locations around the City.  The cause of these deficiencies is not attributable in large fashion to development of any one parcel or area of the City, but rather is due to general traffic growth in the City and, to a lesser extent at these locations, the region.  Transportation impacts are also forecast on Lawrence Expressway and at the Mathilda/237 interchange; these locations are subject to more regional traffic than City intersections, however.  Therefore, a City Transportation impact fee is proposed to fund only a share of improvements to these locations.  The Transportation Impact Fee tier for the Moffett Industrial Park is recommended to fund the local share of major improvements necessary for the Mathilda/237 area, consistent with impact of, and benefit to, development of the area. 

Staff has determined that a broadly applied transportation impact fee on new development is best suited to addressing transportation capacity needs at these locations.  This fee meets the nexus test as determined by the modeling effort.  Staff believes that linking traffic impacts to development at a citywide level is an equitable, reasonable way to apply mitigation.  One purpose of the fee is to provide improved predictability and efficiency to the traffic mitigation process.  Enacting a long term improvement funding program will eliminate the need to conduct traffic impact analysis of many intersection locations, which will smooth the development review process and reduce up front expense to the development community.  It will reduce the amount of “project-specific” traffic analyses, and the need for major roadway mitigation for single specific developments.  Some project-specific analysis may still need to occur, but the Transportation Strategic Program and associated development fees will address major roadway improvement needs associated with development Citywide.  Staff also believes that the smaller scale, limited impact nature of the City intersection improvements to be funded (intersection turn lane additions, etc.) are better suited to the revenue stream of a transportation impact fee.

The level of the fee is corroborated to the level of new development allowed in the City by the General Plan, the amount of (automobile) trips generated by that development, and the cost of roadway system improvement needs necessitated by buildout of the General Plan, as forecast by the transportation model.  A “cost per new trip” is the output of the process, which is then applied to the trip making characteristics of proposed land development.

Staff has assessed the equity of imposition of an impact fee in Sunnyvale compared to other cities in Santa Clara County and around the Bay Area and State.  The level of fee proposed by staff is within the range of what surrounding communities have established for transportation impact fees.  The proposed impact fee level for the area outside of Moffett Park is below the average fee assessment for 40+ comparable cities and below the fee assessments of comparable Santa Clara County cities.  The proposed fee for Moffett Park is average for comparable Santa Clara County cities; fee categories are within  the top 18% to 55% of the 40+ other comparison cities, with the exception of the destination retail rate.  The destination retail rate is set high to account for a much greater destination trip generation rate, and therefore a much greater traffic impact of this type of use.  Office/R & D rates are set at 39% below the highest comparison fee.    Exhibit D presents comparison information.

The proposed Sunnyvale impact fee also includes the cost of certain sidewalk and bicycle improvements.   These improvements are justified to be included in the fee assessment by virtue of their ability to address regional congestion management requirements, or “deficiency planning.”  The City has previously decided that roadway improvements at one location, the intersection of Wolfe Road and El Camino Real/Fremont Avenue, will not be made, and intersection levels of service will be allowed to decline below General Plan standards.  This intersection is defined as “regionally significant” according to the County Congestion Management Program.  The Congestion Management Program is a state law-mandated program to encourage regional coordination and cooperation across jurisdictional boundaries to ease traffic congestion on major roadways.  Congestion Management Program rules allow for levels of service at certain locations to decline if offsetting improvements are made at other locations and/or to other modes of transportation.  The sidewalk and bicycle improvements proposed to be supported by the transportation impact fee have been selected to meet the requirements of offsetting improvements.

As mentioned above, the fee schedule proposed for approval identifies two distinct “zones” for application of the impact fee:  Areas south of Route 237, and properties in the industrial area north of Route 237 (Moffett Park Specific Plan area). The fee amounts for the industrial area north of Moffett Park is based on a different, more expensive set of transportation improvements, including a major project to improve the Mathilda/237 corridor.  Therefore,  fees for the north of 237 area are greater than the south of 237 corridor.  Staff has explored at great lengths with property owners in the area alternative revenue generating mechanisms, focusing primarily on assessment district formation.  At this time, there does not appear to be sufficient support for formation of an assessment district.  Because assessment districts must be supported by a vote of affected property owners, this creates a mandate for consensus.  Reaching consensus of a critical mass of property owners in Moffett Park is complicated by the fact that a small number of owners control large tracts of the Park.  Staff does not believe the required voting support can be achieved to form an assessment district , nor can a financially viable district be created that excludes property owners not in support.  At this time staff is recommending the adoption under the City Council’s authority of a transportation impact fee, so as not to further delay adoption of a transportation funding strategy and hamper continued economic development of the Park.  Staff believes continued discussions of assessment district formation can take place subsequent to fee adoption, at the will of area property owners.  Impact fees by their very nature are the most flexible tool available to the City Council for addressing transportation impacts.  Adjustments to fee levels or changes to the strategy over time due to changed conditions are administratively well accommodated by an impact fee approach.   

Fee amounts are recommended to be set by amendment of the master fee resolution (Exhibit D), and will be effective January 1, 2004.  Fee levels will be reviewed annually hereafter during the annual fee resolution adoption in June of each fiscal year. 

Fees amounts would be as follows assuming approval of the current proposals for Moffett Park Specific Plan and Downtown Improvement Program land use:

Adoption of the fee ordinance does not establish the level of fees.  This is done through adoption or modification of the annual fee schedule.  The fee amounts stated here are illustrative of the level of fees that would be anticipated given the amount of forecast growth with current and pending land use plans, including the Moffett Park Specific Plan project alternative, and the resultant trip generation. The fee schedule is based on a cost per trip, so if trip generation for land use citywide were reduced, the fee would be adjusted accordingly (Cost per trip = cost of improvements/trips generated from new development).  Because the improvement needs (and costs) do not change significantly with the different land use scenarios possible (with/without Moffett Park Specific Plan, Downtown Development Program etc.) it is anticipated that fee levels would be greater per land use unit if the Moffett Park land use changes do not go forward.  The fee calculation for the fee schedule demonstrated above is included in Exhibit F.  Fees collected would be placed in a Transportation Impact Fee Fund, which would be available to pay for the costs of those specific transportation projects identified as necessary to mitigate future growth.

Mathilda/237 Improvements

For the industrial area north of Route 237 (Moffett Park Specific Plan area), a differing set of land use and transportation conditions are present than in the rest of the City.  The industrial area north of Route 237 (Moffett Park Specific Plan area) is envisioned to be a higher growth area than the rest of the City.  Land use changes proposed in the Moffett Park Specific Plan would amplify this circumstance.  Travel to the area is through a limited number of roadways and interchanges, which constrain access.  One gateway is particularly complex, well traveled, and vital – the Mathilda/237 interchange.  This interchange, one of the most “popular” in the City, is forecast to become deficient with future growth in the Moffett Park area, either with or without the Moffett Park Specific Plan.  Other gateways at Fair Oaks Avenue and Lawrence Expressway, are not anticipated to become “choke points” for access as is the Mathilda/237 area. 

These circumstances create a clear benefit of improving the Mathilda/237 corridor to the industrial area north of Route 237 (Moffett Park Specific Plan area) property owners and tenants, more so than for other areas of the City. However, required improvements are anticipated to have a significant cost, and Moffett Park, while a primary beneficiary of traffic improvements, would not necessarily be a sole beneficiary.  The Mathilda/237 interchange, in combination with the nearby Mathilda/101 interchange is a major regional roadway junction. Therefore, the proposed funding strategy for the industrial area north of Route 237 (Moffett Park Specific Plan area) involves a combination of locally generated funds from separately tiered transportation impact fees, and outside funding through the regional transportation plan, the Valley Transportation Plan (VTP).  The City is currently preparing a joint corridor study of the Mathilda/237 area that will result in the programming of specific improvement projects in the Valley Transportation Plan.  This will solidify the potential for improvements in this area to receive outside funding.

As mentioned previously, other revenue generation mechanisms (chiefly permutations of assessment districts) have been explored for the Moffett Park area that would alternatively spread costs over time, assess to property versus new development, and/or allow for creation of bonding capacity to advance transportation improvements. Funding district establishment is a complex and specialized exercise.  Definition of districts, landowner approval, financing, and administration require considerable effort and specialized expertise. At this time staff does not believe there is sufficient consensus among affected parties to support the expenditure of continued or increased effort and resources towards assessment district formation.

Expressway Fair Share

The County Expressway system is a unique and important feature of Sunnyvale’s and the region’s roadway network.  These facilities are part of the fabric of Sunnyvale’s road system, but are the jurisdiction of the County of Santa Clara.  Two expressways, Central Expressway and Lawrence Expressway, provide higher speed, limited access corridors that are integrated with the city’s major roadway network and connect with neighboring communities.  These facilities act in some respects like City arterial streets, and in some respects like controlled access highways.  The City has long recognized the vitality of an effective expressway network, and has partnered with the County of Santa Clara on a number of expressway improvements.  This is the approach that staff has taken with the Transportation Strategic Program for addressing the forecasted needs for the expressway system. 

Concurrent with development of the Transportation Strategic Program, the County Roads and Airports Department has been developing a Comprehensive Countywide Expressway Study and Implementation Plan.  The City has actively participated in a technical working group and a Policy Advisory Board for the Expressway Study, and County staff has been kept abreast of progress on the Transportation Strategic Program.  Vice Mayor Risch represents the City and Councilmember Valerio the VTA on the Expressway Study Policy Advisory Board.  The City endorsed the Expressway Study at its May 13, 2003 meeting.

Early on in the Expressway Study City and County staff coordinated modeling efforts and agreed that regional level modeling of the expressway system was most appropriate for both studies, primarily for reasons of consistency across jurisdictional boundaries.  Transportation Strategic Program recommendations for the improvements to the expressway system are based on and consistent with the findings of the Comprehensive Countywide Expressway Study.  City staff have reviewed and approved the County’s modeling efforts, as well as provided data and information on other aspects of expressway operations and planning that are important to the City to be reflected in the Implementation Plan. 

The Expressway Study finds that three “tiers,” or stages of improvements are necessary to support forecast traffic growth in the region.  The bulk of improvements to Lawrence Expressway and Central Expressway in Sunnyvale are capacity improvements to Lawrence Expressway.  The Transportation Strategic Program, as a roadway capacity (Level of Service) mitigation tool of the City’s General Plan, focuses on identifying a “fair share” of mitigation for expressway deficiencies caused by General Plan growth in the City.  Using this approach, staff has identified a technical basis for defining a fair share, and an implementation mechanism to define a relationship with the County to meet legal requirements for the application of impact funds.

Using the transportation model, an analysis shows that 34% of traffic growth on Lawrence Expressway can be anticipated to be generated by land uses within the City at key locations.  Staff proposes to use this objective measure as the determinant of “fair share” for City participation in improvement costs.  Forecast improvement needs are minor intersection improvements/restrictions in “Tier 1A” of the Implementation Plan, and three major grade separations in “Tier 1B” of the Plan.  No Tier 2 and Tier 3 improvements are forecast to be necessary to meet City level of service standards.  Tier 1A is proposed to be funded by constrained funds in the VTP 2020.  No funding source has been identified yet for Tier 1B projects.